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EUC urges Council to act quickly on request to hike electric rates

Wednesday, December 21, 2011 by Bill McCann

Warning that Austin Energy faces a possible revenue shortfall of $2 million a week in 2012, the advisory Electric Utility Commission has recommended that the City Council move quickly on setting new electric rates.  


The seven-member commission voted 4-2 on Monday, with Commissioner Shudde Fath abstaining, in support of a resolution by Commissioner Stephen Smaha urging the Council “to complete its rate review and approval process as quickly as possible to mitigate the impact of AE’s revenue shortfall on utility operations.”


The resolution did not suggest a specific timetable for Council action. The Council is scheduled to hold a hearing on Jan. 12 at City Hall to get the public’s response to the proposed rate package, which Austin Energy presented to the Council on Dec. 14. The Council could hold a second hearing on Jan. 26 and take action then, as proposed by Austin Energy, or it could set other hearings before taking final action.  


The rate package proposes a number of changes to the utility’s rate structure, including the first increase in basic electric rates since 1994. The proposal has drawn considerable criticism, especially from groups representing residential customers. Residential ratepayers would see a $10 to $20 increase in monthly bills under the proposed rate package, according to Austin Energy. Earlier this fall, some consumer representatives, upset by some provisions of the rate package, suggested that Austin Energy start the whole process over again. There also was some talk then that the Council might delay a decision until after the May Council election.


In October, the Electric Utility Commission generally supported the provisions of the rate package, although commissioners split 4-3 on several key provisions – including significant increases in fixed charges on bills and the method of allocating the relative costs to serve the different rate classes.


In his resolution, Smaha said Austin Energy reported that it expects expenses to exceed its collected revenues by $126 million during 2012 without a rate increase. About $102 million of that shortfall would occur in the utility’s operating budget, implying an average revenue shortfall of about $2 million a week or nearly $280,000 a day without a rate increase that meets the utility’s cost of service, the resolution stated.


“Acting sooner is a better idea than acting later,” Smaha said. “The $2 million a week cost of delaying (the rates) will have to be made up later.”


Commissioner Barbara Day, who has raised numerous concerns about the rate package in past meetings, strongly opposed the resolution saying, “I would not presume to tell the City Council what to do. It (the resolution) gives the false impression of the necessity of certain rate increases.”


Joining Day in voting against the resolution was Vice Chair Linda Shaw in voting.


Noting that Austin Energy officials have warned for years that the utility faced budget shortfalls without a rate increase, Commissioner Michael Webber backed the resolution saying, “I feel a sense of urgency here. The cost of delay is quite expensive.”


Commission Chair Phillip Schmandt added: “It would be irresponsible if we don’t give advice to the Council.”


In a separate discussion of a possible second resolution, Smaha suggested it was particularly important that the Council take final action by the end of February (assuming the new rates would take effect 60 days later). That would give customers a chance to get at least one bill with the new rates before higher summer charges kick in, he said.  If there were further delays, customers would face new higher rates on top of increased summer charges and higher usage as days get hotter, he said. 


“I’m thinking how all kinds of hell could break loose if that happens,” Smaha said, adding that customers most likely would take out their anger on the Council.


Council members have received numerous emails protesting the rate increase, quite a few of which were generated by churches. Recent news stories have focused on complaints from church leaders about the impact increased rates might have on them.

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